Strong 3Q for Viacom; Wolf to MTVN

11/01/2005 3:17 AM Eastern

By: Mike Farrell

In what was its last quarterly conference call as a combined company, Viacom Inc. reported strong results, driven primarily by its cable networks.

Viacom reported revenue growth of 10% to $5.9 billion (above analysts’ consensus estimate of $5.6 billion), and operating income rose 5% to $1.4 billion, despite a one-time charge of $58 million. Operating income before depreciation and amortization rose 11% to $740 million from $665 million in the previous year.

Leading that growth was a 15% revenue increase at its cable networks -- which include MTV Networks, Black Entertainment Television and Comedy Central -- driven by a 17% increase in advertising sales. Operating income at the networks was up 11% to $682 million.

Viacom also announced that it has named former McKinsey & Co. managing director Michael Wolf as president and chief operating officer of MTVN. Wolf will report directly to MTVN chairman and CEO Judy McGrath.

This was the last quarterly conference call before Viacom completes its planned split into two separate companies -- Viacom Inc., including MTVN and Paramount Pictures, and CBS Corp., including the CBS broadcast television network, Infinity Broadcasting Corp. and Showtime Networks Inc. That split is expected to be completed before the end of the year.

Viacom co-COO Les Moonves (who will become CEO of CBS Corp. after the split is completed) reiterated on the call his desire to receive cash for retransmission consent from distributors of its CBS network, but again declined to give details.

“The fact is, we haven’t been paid for what our signal is worth, but that will change soon,” Moonves said on the conference call. “We will be paid for our signal and, once again, the business model will shift and revenue will flow our way. It’s fair, it’s common sense and it’s on the way.”

Most cable operators have long-term retrans deals with CBS, so it is unlikely that the network will be getting cash from them anytime soon. However, Moonves said on the call that the situation is different for telephone companies launching their own video services, like Verizon Communications Inc. and SBC Communications Inc.

“Our telco deals that are coming up, we expect to get retrans almost immediately,” he added. “It bodes well for the future when the bigger cable deals come up, as well.”

Moonves also left the door open when asked if the new CBS would be interested in buying cable networks, including College Sports Television.

“We’re looking at everything,” Moonves said. “I don’t see us competing with the other side of the family [Viacom]; I don’t see us buying a music channel or a kids' channel. If there is something that fits with some of the businesses that we are already in, we certainly would consider that. The cable business is a very good business. We’re looking at everything that fits what we do.”